Skip Navigation

Burlington Electric Department And Mayor Propose Net Zero Energy Revenue Bond

September 3, 2021

by Paul Ciampoli
APPA News Director
September 3, 2021

Burlington, Vermont, Mayor Miro Weinberger and public power utility Burlington Electric Department (BED) have proposed a new, $20 million Net Zero Energy Revenue Bond that would accelerate progress toward Burlington’s climate goals, while reducing upward rate pressure for BED customers, BED reported on Sept. 2.

In addition, the mayor and BED announced that BED’s green stimulus program would continue and that Moody’s Investors Service affirmed BED’s A3 rating.

The Net Zero Energy Revenue Bond, combined with a portion of BED’s annual General Obligation (GO) Bond, would make numerous investments, including:

The Net Zero Energy Revenue Bond would reduce future rate pressure significantly for BED customers relative to a scenario where BED made these investments without the bond, BED noted.

Debt service on the revenue bond proposal and that portion of the GO bond used for strategic electrification would be supported by net revenue from strategic electrification projects between Fiscal Year 2023 and Fiscal Year 2025 that will contribute approximately 40 percent of BED’s obligation over the 20-year debt service life of the bonds and savings of $684,000 of BED’s debt service starting in Fiscal Year 2026, due to the maturity of existing bond debt.

Also, under a new Vermont Public Utility Commission (PUC) order approving a BED proposal, the utility will double funding at least through the end of Fiscal Year 2025 for strategic electrification, including continuing its green stimulus program.

The doubling of funding would be supported by approximately $5.3 million from BED’s annual GO Bond. This will reduce fossil fuel use through customer incentives for heat pumps, EVs, electric lawn care equipment, electric bikes, and more, as well as avoid over 47,000 tons emissions, equivalent to nearly 100,000 barrels of oil burned, compared to business as usual, BED said.

Meanwhile, Moody’s Investors Service affirmed BED’s A3 rating on outstanding revenue bonds on August 16, 2021, with a stable outlook. Moody’s cited BED’s 100 percent renewable power supply, the diverse local economy in Burlington, and recent action to adjust rates for the first time in 12 years as positive indicators.

Among the first of its kind nationwide, the Net Zero Energy Revenue Bond proposal was recommended by the Burlington Electric Commission by a 5-0 vote. The Burlington Board of Finance and City Council will consider the proposal for placement on the November ballot at their September 13 meetings.

In September 2019, Weinberger, joined by BED General Manager Darren Springer, City Director of Sustainability Jennifer Green, and other stakeholders, released the City’s Net Zero Energy Roadmap. More than a year in the making, the roadmap studies what it will take for Burlington to accomplish its goal to become a Net Zero Energy city by 2030, and identifies four key pathways to get there.

Springer discussed the roadmap in an episode of the American Public Power Association’s Public Power Now podcast.

Details On Green Stimulus Program

In the wake of the COVID-19 pandemic, Weinberger announced that a new green stimulus program would be launched using existing funds to support a range of expanded and new initiatives to help boost both the city’s economic recovery from the pandemic and its transition to becoming a Net Zero Energy city.

In response, BED worked quickly last year to implement the green stimulus, which launched on June 1, 2020 and offers incentives for technologies including heat pumps, heat pump water heaters, electric vehicles, and more.

The success in 2020 of the green stimulus led the mayor and BED to announce that the green stimulus program initiatives have been extended into 2021 and will remain available through year’s end or until funding is exhausted.

Fitch Report Shows Strong Financial Trends For Public Power Utilities

July 26, 2021

by Peter Maloney
APPA News
July 26, 2021

Public power utilities in the United States are exhibiting strong financial trends and improving credit quality, according to a new report from Fitch Ratings.

The report, 2021 U.S. Public Power Peer Review, presents a variety of metrics, such as cash on hand, leverage, and debt service coverage, to gauge the financial health of the sector and compare performance across covered utilities as a whole and by classes.

“The latest peer review shows that modest ratios of capital investment to depreciation and improving coverage medians again contributed to low leverage and improving credit quality throughout the public power sector in 2020,” Dennis Pidherny, managing director of U.S. public finance at Fitch, said in a statement.

“These results are particularly surprising given the impact of the coronavirus outbreak and the related economic contraction,” Pidherny said. “They further illustrate the sector’s operating and financial resilience, and its ability to record strong performance even through a very challenging period.”

Among the prominent trends, Pidherny noted that median ratios for coverage of full obligations improved for both wholesale and retail systems, sustaining an upward trend. Wholesale and retail, as well as combined ratios for Fitch entire portfolio of public power utilities continued a gentle upward slope, converging around 1.4 times debt obligations in the 2021 peer review.

Cash on hand medians for retail and wholesale utilities improved again, rising to the highest levels observed in a decade, according to the report. Fitch analysts attributed the build-up of excess cash to modest levels of capital investment, stronger than anticipated demand through the coronavirus pandemic, and disciplined rate setting initiatives.

The median capital expenditure-to-depreciation ratio for wholesale power systems continued a downward trend, falling to 71 percent. The median ratio has been below at or below 100 percent for five of the last seven years, according to the report. The median capex-to-depreciation ratio for retail power systems “improved” to 149 percent, a level last observed in 2010, Fitch said.

Leverage metrics for both wholesale and retail systems were largely unchanged, the report found, with a modest increase in leverage among retail power systems offset by a modest decline in metrics for wholesale systems. Overall, the metric reflects the continuation of a deleveraging trend that began over a decade ago, Fitch said.

Fitch calculated the ratios for each issuer using audited information. More than half the audits used in the report are dated Dec. 31, 2020, but different audit dates were also used and could skew the ratio distribution, Fitch noted. The rating agency also noted that the ratios and metrics in the report may occasionally differ from those reported in new issue and rating reports because of adjustments made during the rating process to reflect additional information received from the issuer.

Moody’s, S&P affirm strong credit ratings for OPPD

July 1, 2021

by Paul Ciampoli
APPA News Director
July 1, 2021

Moody’s Investors Service and S&P Global recently affirmed strong ratings on long-term bonds and short-term debt for Omaha Public Power District (OPPD), the Nebraska public power utility reported on July 1.

Moody’s credit opinion affirmed OPPD’s Aa2 senior bond rating, Aa3 subordinate bond rating, and P-1 commercial paper (CP) rating with a stable outlook. It pointed to OPPD’s strengths in maintaining competitive rates, as well as sound debt service coverage (DSC) and liquidity. Over the last two years, OPPD has achieved DSC averaging 2.37x, while days’ cash on-hand has averaged around 180 days.

The utility’s credit quality, Moody’s noted, is further supported by its location in an all-public-power state. The agency also praised the utility’s strong 13-county southeast Nebraska service area, which has proven resilient through economic cycles.

Meanwhile, S&P affirmed OPPD’s AA senior bond rating, AA- subordinate bond rating, and A-1+ CP rating.

At the end of 2020, the utility had $1.7 billion of senior- and subordinate-lien bonds outstanding, and $250 million CP notes. In March, OPPD increased its CP authorization to $350 million (from $250 million), and secured an additional $200 million line of credit, bringing total liquidity facilities to $450 million.

The district’s key strengths that S&P points to include, “a strong and diverse customer base supported by an economically sound service area, the district’s proven ability to maintain robust coverage of fixed charges, and substantial liquidity.”

S&P called OPPD’s enterprise risk profile “very strong.” Contributing factors include a deep and diverse customer base, as well as plans to lower carbon intensity, while adding up to 600 megawatts of solar generation with natural gas backup.

Like Moody’s, S&P also noted that OPPD is in a strong market position with its competitive rates.

S&P, Fitch affirm New York Power Authority’s credit rating

June 15, 2021

by Paul Ciampoli
APPA News Director
June 15, 2021

S&P Global Ratings and Fitch Ratings have both affirmed their strong ratings on New York Power Authority’s (NYPA) long-term bonds and short-term debt, NYPA reported on June 15.

NYPA said that the ratings align with New York State’s overall positive fiscal outlook, as announced by Governor Andrew Cuomo June 14.

 S&P and Fitch both affirmed an AA rating for more than $1.6 billion of NYPA senior revenue bonds as well as an A1-plus rating and F1-plus rating for the Power Authority’s subordinate lien series 1-3 commercial paper and its series 1 extendible municipal notes.

S&P noted that its positive rating reflects “favorable leverage metrics even after the utility added $1.1 billion of debt in 2020,” referring to NYPA’s historic green bond sale, which won NYPA Bond Buyer’s Deal of the Year 2020.

Fitch noted that “NYPA’s financial profile remains strong” and it “benefits from very strong rate flexibility.”

 “These ratings reflect NYPA’s financial strength and stellar credit metrics, and our commitment to maintaining them through this unprecedented pandemic,” said Gil Quiniones, NYPA president and CEO, in a statement. “They ensure NYPA is able to continue leveraging the capital markets so that we can continue to provide affordable, reliable, and green electricity in support of the state’s transition into a clean energy economy.”

Bill allows public power to receive refundable direct payment for energy tax credits

May 27, 2021

by Paul Ciampoli
APPA News Director
May 27, 2021

The Clean Energy for America Act (CEA), which includes a provision to allow public power to receive refundable direct payment for energy tax credits, is headed to the Senate floor after debate and amendment on May 26 by the Senate Finance Committee.

As amended, the CEA provides $260 billion in tax relief over the next decade and would replace the current investment tax credit (ITC) and production tax credit (PTC) with technology neutral ITCs and PTCs. As part of these revisions, the bill would allow merchant power generators, investor-owned utilities, public power utilities, rural electric cooperatives and Indian tribal governments to receive refundable direct payments of the ITC and PTC. The Joint Committee on Taxation estimates that roughly $50 billion of such payments would be made over the next decade.

The original bill would have denied access to refundable tax credits to public power utilities, rural electric cooperatives, and Indian tribal governments.

However, the American Public Power Association, the Large Public Power Council (LPPC), and National Rural Electric Cooperative Association (NRECA) joined in advocating for their inclusion. As a result, committee member Sen. Michael Bennet, D-Colo., offered a direct pay amendment that was eventually adopted as part of a broader package of amendments to the original version of the bill.

“We should make these tax incentives accessible to electric coops, public power companies, and tribes,” Bennet said during markup of the bill. “They are doing yeoman’s work to transition to clean energy and drive opportunity in rural America and we should support them.”

In a May 26 letter to Bennet, Joy Ditto, President and CEO of APPA, Jim Matheson, CEO of NRECA, and John Di Stasio, President of the LPPC, praised his amendment.

As drafted, the CEA “allowed some utilities to immediately receive the benefit of certain energy tax credits. With the inclusion of your amendment, it now also would allow public power utilities, rural electric cooperatives, and Indian tribal governments to do so. That would mean more local projects, with local jobs, under local control. Having direct ownership as an option also will help our members develop a generation mix that best suits the needs of the customers,” wrote Ditto, Matheson and Di Stasio.

Inclusion of refundable direct payment tax credits in the CEA means that leading proposals in the House (H.R. 848, the GREEN Act) and Senate are now in agreement on the issue. If enacted into final law, this would be the first time in the history of energy-related tax credits that public power utilities would truly have equal access to such credits.

Bennet’s amendment retains current law prohibitions on receiving tax credits for projects receiving “subsidized” financing, including tax-exempt financing. While final legislative text is not available, it appears the intention is to preclude the use of tax-exempt financing for a project that also receives energy-related refundable tax credits. But analysis done by APPA and others shows that the value of the investment tax credit and production tax credit substantially exceeds the cost of losing the ability to issue tax-exempt debt to finance such projects.

In addition, “Chairman’s Modifications” to the CEA from Sen. Ron Wyden, D-Ore., Chairman of the Senate Finance Committee, struck a provision that would have allowed public power utilities and rural electric cooperatives to issue taxable direct payment Clean Energy Bonds (CEBs). While such bonds could have been highly valuable for long-lived assets, many of the assets that utilities will invest in in the near term – including battery storage and wind turbines – have shorter useful lives.

Moody’s affirms rating assigned to Guam Power Authority bonds, changes outlook to stable

May 21, 2021

by APPA News
May 21, 2021

Moody’s Investors Service on May 13 affirmed the Baa2 rating assigned to the Guam Power Authority’s (GPA) senior revenue bonds and changed the outlook to stable from negative.

The affirmation of the Baa2 rating and outlook change to stable follows Moody’s rating action on the Government of Guam’s general obligation bonds rating which was affirmed at Ba1 with a stable outlook on May 4, 2021, GPA noted in a news release.

Moody’s also stated GPA’s Baa2 rating reflects its strong position as the sole provider of electricity to residential customers on the island of Guam and to the US military in the report.  

 “We welcome this positive affirmation and improved rating of GPA’s credit-worthiness, which is good news for all ratepayers,” said GPA General Manager John M. Benavente, P.E., in a statement.

“As Moody’s has noted, there are many concurrent challenges facing GPA today. We will continue our work across all utility areas, and with governing leadership and bodies to bring the energy solutions for Guam forward, so GPA remains financially strong,” he said.  “This affirmation of bond rating will translate to optimal interest rates, as GPA heads to the bond market to refinance and lower its borrowed costs,” Benavente concluded.

In honor of Asian American and Pacific Islander (API) Heritage Month – commemorated each May – the American Public Power Association’s Public Power Current newsletter recently spotlighted the leadership roles our API colleagues have at public power utilities across the United States and at our U.S. territories in the Western Pacific. We kicked off our coverage by sharing updates from Guam.

Benavente is a member of APPA’s Board of Directors.

Legislation amends tax credit proposal to include public power utilities

May 20, 2021

by Paul Ciampoli
APPA News Director
May 20, 2021

Rep. Earl Blumenauer, D-Ore., has amended and reintroduced legislation from the 116th Congress to allow entities with little to no tax liability to still take advantage of energy-related investment tax credits (ITC) and production tax credits (PTC).

The bill in the 116th Congress, which ended on Jan. 3, 2021, had allowed for the transfer of such tax credits to other project partners.

The Renewable Energy Incentive Act introduced on May 13 would instead allow for the direct payment of energy-related ITC and PTCs as refundable tax credits. The bill has also been modified to include public power utilities as eligible entities.

In a May 13 letter to Blumenauer, Joy Ditto, President and CEO of the American Public Power Association, expressed thanks to the lawmaker “for working to ensure that the Renewable Energy Investment Act will allow all electric utilities, including public power utilities, to benefit from incentives intended to encourage critical energy investments needed to transition to cleaner generating technologies. This will make these incentives fairer and more effective.”

Ditto noted that federal tax expenditures are the primary tool Congress uses to incentivize energy-related investments. However, such incentives do not work for tax-exempt entities, such as public power utilities. “That means public power utilities are deterred from owning such facilities as a direct result of federal policy — and explains why 80 percent of the nation’s (non-hydropower) renewable energy generating capacity is owned by merchant generators,” she wrote.

The Renewable Energy Investment Act “is designed to address this inequity by allowing for the direct payment of energy production and investment tax credits to any entity that owns the project. This would remove the financial disincentive for public power utilities to own such facilities, which are needed to transition to cleaner generating technologies and address climate change, and would allow the full value of these credits to pay for additional investment or be passed on to our 49 million customers,” Ditto said.

Groups press for access to direct payment refundable energy tax credits

May 17, 2021

by Paul Ciampoli
APPA News Director
May 17, 2021

Public power utilities and rural electric cooperatives should be allowed to receive direct payment refundable energy tax credits, leaders of the American Public Power Association (APPA), National Rural Electric Cooperative Association (NRECA) and Large Public Power Council (LPPC) told congressional leaders in a May 14 letter.

While refundable credits have for several years been one option under consideration for providing comparable incentives to energy tax credits, the letter is the first joint statement specifically citing them as the preferred approach.

The letter, which was sent to House Speaker Nancy Pelosi, D-Calif., Minority Leader Kevin McCarthy, R-Calif., Senate Majority Leader Charles Schumer, D-N.Y., and Senate Minority Leader Mitch McConnell. R-Kentucky, was signed by APPA President and CEO Joy Ditto, NRECA CEO Jim Matheson and LPPC President John Di Stasio.

The letter notes that earlier this year, President Biden set ambitious targets for reducing greenhouse gas emissions from power generation, transportation, and other sources. “Reaching these goals will be a daunting challenge, but our members have been and continue to be committed to reduce greenhouse gas emissions,” wrote Ditto, Matheson and Di Stasio.

“However, for community-owned electric utilities, all the increased costs associated with drastically reshaping our generation profile will be borne by our customers and consumer-owners. As such, we cannot afford inefficient or ineffective policies. If the goal is to move toward a cleaner energy grid by providing tax incentives for developing clean energy generation, storage, transmission, and electric vehicle (EV) recharging infrastructure, federal incentives must be made available to all electricity providers,” the three association leaders said.

They argued that one of the most significant shortcomings of federal energy tax policy is that not-for-profit and tax-exempt community-owned electric utilities have been excluded from being able to directly claim these credits. “The result is that our utilities only indirectly benefit from energy-related tax incentives.”

This is typically done through long-term power purchase agreements (PPAs) with taxable project developers and their tax equity partners, which claim these credits. “PPAs are complex and expensive, and much of the value of the credits flow to the project developers and their investors rather than to the not-for-profit utilities and their customers,” wrote Ditto, Matheson and Di Stasio.

“Further, to qualify for the credit, the project developer and tax-equity investors must retain ownership of the facility and our utilities may only later purchase the facilities by paying the owner the fair market value of the facility. This increases the cost and inefficiency of the present system and means that the purchasing utility is denied the substantial operational benefits that flow from direct ownership.”

Allowing public power utilities and rural electric cooperatives to receive these tax credits in the form of direct payments for building clean energy infrastructure “would ensure that all utilities serving all Americans would have equal access to these federal resources. The direct payments would be used to help offset project costs — increasing the incentive for further investments — and would enable public power utilities and rural electric cooperatives to own these facilities directly. It would also mean more local projects, with local jobs, under local control. Having direct ownership as an option will help our members develop a generation mix that best suits the needs of the customers.” 

The President and Congress “have ambitious climate goals that cannot be met by leaving nearly 30 percent of the nation’s electric utility customers without access to incentives and support,” the letter said. To that end, Ditto, Matheson and Di Stasio urged Congress to provide direct pay for credits to public power utilities and rural electric cooperatives.  

APPA praises Clean Energy for America Act for helping public power invest in clean energy

April 21, 2021

by Paul Ciampoli
APPA News Director
April 21, 2021

The American Public Power Association (APPA) on April 21 said it appreciates the work Senate Finance Committee Chairman Ron Wyden, D-Ore., and his staff have put into refining and improving federal energy tax incentives in the Clean Energy for America Act (CEA).

The CEA recognizes that tax-exempt entities are excluded from energy investment tax incentives, which are intended to promote non-emitting resources to address climate change. Lack of access to these incentives makes it difficult for public power utilities to make investments in clean energy resources.

This is a significant omission given that tax-exempt entities, including public power utilities, serve nearly 30 percent of the nation’s retail customers, or approximately 90 million Americans, APPA said in a news release.
 
APPA noted that the CEA encourages key investments by public power utilities and rural electric cooperatives by allowing these projects to be financed with taxable direct payment Clean Energy Bonds (CEBs).

Projects financed by a CEB would not qualify for either the investment or production tax credits. However, the federal government would reimburse the project owner by making payments of up to 70 percent of the interest paid on a CEB. These payments would provide a significant savings over the life of a project, APPA said.
 
The GREEN Act, which will be considered by the House of Representatives later this year, takes a different approach by allowing public power utilities to receive discounted tax credits and production tax credits on a refundable basis. 

APPA said that it is pleased to see that Congress “is now considering how to best to ensure that all utilities are included in energy incentives, not stuck on whether to do it at all. With these incentives, not-for-profit utilities will be better positioned to finance and build clean energy resources to help face the challenges posed by climate change.”

House bill would reinstate ability to issue tax-exempt advance refunding bonds

April 1, 2021

by Paul Ciampoli
APPA News Director
April 1, 2021

House Municipal Finance Caucus Chairmen Dutch Ruppersberger, D-Md., and Steve Stiver, R-Ohio, recently reintroduced the Investing in Our Communities Act (H.R. 2288), which would reinstate the ability to issue tax-exempt advance refunding bonds.

This is one of the American Public Power Association’s top tax legislative priorities and APPA supports the House bill, which has 22 additional original Democratic and Republican cosponsors.

A related bill was introduced on February 25 by Senators Roger Wicker (R-MS) and Debbie Stabenow (D-MI). 

The Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act of 2021 (S. 479) has 18 additional Democratic and Republican cosponsors.